Importing your supplies from overseas can help you lower your production costs and increase your profit margins. Before you start though, you’ll need a carefully thought-out plan of action. This guide looks at the steps you’ll need to take to help ensure success.
There may be a
number of benefits attached to choosing a supplier from overseas. These
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goods: Lower labour costs or a different tax set-up may mean the price you’ll
pay in one country for a particular product, even with transport costs, is much
lower than you’d pay in the UK.
finished products: Every country has its specialist skills and strengths. If
you want to sell the best, it could make sense to import it.
skills: In some cultures, there are traditional crafts and skills that have
been carried on for generations, and which would be hard to replicate
products and raw materials: Originality and authenticity are important in some
markets if you want to keep ahead of your competitors.
Sourcing suppliers abroad
The key to making a
success of importing often lies in choosing the right supplier to begin with.
This means you’ll first need to do some research, but there are a number of
sources that can help:
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representation in the UK: Many organisations with an interest in exporting to
the UK have some sort of representation here. You may able to get details from
the relevant foreign Chamber of Commerce, or the commercial department within a
foreign embassy or consulate.
trade exhibitions and fairs: These will be full of suppliers wanting to do
business with UK businesses.
own trade associations: They will have links to companies in your market, so
they can be a good place to get contacts and guidance. They may also be able to
warn you about specific market issues.
journals: They may carry details of exporters wanting to trade with the UK.
Internet: This is another useful method of searching for suppliers, although
you should take care to establish the authenticity of overseas businesses you
agents or exporters: An agent based in the country you want to import from can
help speed up the process. They’ll also be able to guide you through the
the merchandise: If the product you want to import is already available in the
UK, there's nothing to stop you checking the country of origin markings. You
can then get in touch with that country's consulate or Chamber of Commerce for
information on agents and suppliers to contact.
Avoiding the pitfalls
Trading internationally may carry more risk than dealing with UK-based companies, where it’s easier to check creditworthiness and quality of goods. If you want to import successfully however, there are a number of issues you’ll need to take into account:
The reliability of
your supplier is crucial if you’re to make importing a success. Find out as
much as you can about them through your business contacts and consider asking
for references from their bank or an international credit reference agency.
There is also no substitute for visiting the company in person.
You may be held
liable for any harm caused to individuals by goods you have imported. As a
result, you may want to look into insurance to cover this.
Agree the total cost
With imports, it is
essential to check that the price you’ve agreed includes everything from packaging
and insurance, to delivery costs and import duties.
Go over the terms
and conditions of your contract extremely carefully, to make sure that all
costs are included.
exchange rates can reduce your profitability, since they can affect the price
of both imports and exports. So you should always make sure you know the impact
that changing exchange rates could have on your profit margins and cash flow.
One way to protect yourself is with a forward exchange contract. This is a binding
obligation to buy or sell a certain amount of foreign currency at a pre-agreed
rate of exchange, on or before a certain date. It lets you budget at a
guaranteed rate of exchange. Back to top
When you’re going ahead with an order
What a purchase order should contain
Typically, your order should include:
- The agreed price of the goods requested
- The quantity ordered
- The quality required
- The delivery schedule, terms and costs
- How the goods will be packaged for shipping
- Payment terms
Your legal adviser, or trade association, should be able to give you advice on typical terms and conditions for your specific industry.
Test the water
It may be worth ordering only a small quantity from a new supplier to begin with. That way you can find out more about your supplier's efficiency and reliability, how easy
they are to deal with, and the quality of their product.
Overcoming language barriers
When ordering from abroad, double check that your supplier has understood exactly what your
requirements are. If your first languages are not the same, there could be room
for misunderstanding. Think about whether a translator might help ensure that
what's been agreed is clearly understood by all parties.
Allow plenty of time
Take into account the extra time it could take for an order to reach you from overseas. You’ll need to factor that into the delivery times you give to your customers. The
shipping time could be longer and there could be delays with goods being cleared through customs.
How you choose to pay your suppliers depends on a number of factors, not least the level of trust between you.
Open account – Here, the supplier trusts your ability to
pay them against their invoice within, say, 30 days. Clearing banks offer fast
money electronic transfer systems for these kinds of transactions. Or you could
open a euro currency account allowing you to trade with countries in the
Eurozone using just one account.
Letters of credit - These offer both buyer and seller extra
security and they are honoured through the banking system. The conditions of
sale are stated on the letter of credit, including the amount to be paid, a
description of the goods and what documents the exporter must present to
receive payment. The importer's bank then ensures payment is made if those
conditions are met.
Documentary collections - Documents relating to the goods to be imported are sent by the supplier through their bank, to your bank. Your bank takes receipt of all the shipping documents and invoices, which will state the method of payment. Your bank then notifies you when it has all the documents. The advantage of this option is that you, as
the importer, don't have to make payment for the goods until you have accepted
the documents relating to them from your bank.Back to top
Paperwork and legal matters
Import licences and quotas
Many countries will
try to limit the quantity of certain goods being exported from their country.
If the government’s quota has already been reached, you won't be able to import
that particular product. This process is normally regulated by the issue of
import and export licences.
The EU allows
unrestricted movement of the majority of goods between its members, although
you may still need an import licence. For goods imported from outside the EU,
the rate of duty is decided by how the goods are classified. For help with
Tariff Classification, call the Tariff Classification helpline on 01702 366077.
Import VAT is
levied on the value of the goods at the standard rate, plus any related costs
including duty, freight and insurance. Companies importing regularly are
sometimes advised to obtain a deferment account. Your local HM Revenue &
Customs guidance centre can offer further help on this.
Product safety and marking
UK law states that you
must make sure any products you import are safe and comply with the relevant
product standards. They may need to be tested in an accredited laboratory. For
more information about marking and standards of safety for particular products,
speak to your local trading standards officers.Back to top
Terms of delivery and transport method
Some suppliers will
quote for their goods including the transport or freight charges, but you may
want to take responsibility for your goods earlier in the process. This allows
you to choose the carrier, the delivery route and the point of entry into the
UK. It’s always advisable to inspect your goods as soon as you receive them.
insurance yourself allows you to determine the level and extent of cover. For
example, the goods might only be covered by the exporter until they reach a UK
port, whereas you might want them to be covered all the way to the warehouse
gates. It also means that, if there's a problem, you are dealing with a
UK-based company that speaks your language.
There is a set of
common terms that are used by most international suppliers, shippers, insurance
brokers and agents in their documentation. These are referred to as
international commercial terms (INCOTERMS).Back to top
Where to go for advice
HMRC Business Guidance
Explore quick and accessible content via webinar’s, e-learning tools and videos. If you would like
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